Shouldn’t the banks be doing better this earnings season?
Rising interest rates are usually a cause for celebration in the industry but instead of striking up the band the sector has just left investors feeling rather flat.
AJ Bell’s Russ Mould said: “Lloyds is just the latest name to disappoint the market. The problem is that rates are rising at a time when the economy is slowing, a somewhat unusual situation reflecting the exceptional inflationary pressures facing central banks.
“This means that while higher rates are boosting profit in the short term, they are creating a situation whereby lots of businesses and consumers are struggling to pay their debts.
“A key feature of Lloyds’ latest update is the need to put aside more money to cover bad loans, with the bank already seeing modestly increased signs of stress out there.
“The numbers themselves were broadly in line with what had been forecast, though updated medium-term guidance will likely disappoint the market given it falls short of what its closest lookalike – NatWest – is promising in terms of returns.
“Lloyds is facing its own pressures on costs, although the company remains confident in its ability to keep rewarding shareholders with generous dividends and share buybacks. Given asketchy track record and an uncertain outlook this may not be enough to secure the patience of investors.”
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